Federal prosecutors move to seize cash from Colorado marijuana company

Dried flowers of a marijuana plant are shown in this January 2014 file photo. (The Broomfield Enterprise)

Federal prosecutors are seeking to seize more than $850,000 from a Denver medical marijuana business in one of the largest civil forfeiture actions ever taken against the cannabis industry in Colorado.

The attempted seizure stems from a major indictment last year in state court of a dozen people tied to several medical marijuana dispensaries. The forfeiture complaint, which was filed in February but only unsealed Monday, seeks to seize money held in bank accounts of several people — including some of those indicted in the state case. Federal prosecutors are also trying to seize a warehouse at 5105 E. 39th Ave. in Denver, where they allege marijuana was illegally grown and distributed to three dispensaries mentioned in the state indictment.

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"The warehouse and money that is the subject of this forfeiture action were proceeds of an illegal scheme perpetrated by certain individuals who were not only violating federal law, they were violating Colorado state law," Colorado U.S. Attorney John Walsh said in a statement.

The Colorado attorney general's office announced the 71-count state-court indictment last June. The indictment accuses the owners and others connected to three dispensaries — Jane Medicals and Higher Health Medical in Denver and All Care Wellness Centers in Lakewood — with using the stores as fronts for an investment scam and an illegal pot-growing operation. Among the specific allegations, the indictment accuses one of the dispensaries' owners, Conley Hoskins, of setting up illegal residential marijuana grows to supply the stores and of selling pot to people without medical marijuana cards.

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Hoskins' lawyer at the time, Steve Peters, denied the allegations.

"The attorney general's indictment is full of tortured and baseless allegations," Peters said last June.

The civil forfeiture complaint filed in federal court repeats some of the details contained in the indictment, but it does not make specific allegations of state law violations. Because all marijuana cultivation and distribution is illegal under federal law, federal prosecutors do not have to prove the businesses violated state law in order to seize their assets.

A spokesman for Walsh said prosecutors believe the businesses involved violated at least two of the eight factors the deputy U.S. attorney general listed in a memo outlining when federal authorities would intervene in state marijuana-legalization efforts.

The forfeiture complaint also adds new details about the businesses and the warehouse on East 39th Avenue.

According to the complaint, the warehouse's two owners — David Krause and Janet Joyce — spent about $300,000 to renovate the warehouse for marijuana growing and then leased it to Hoskins. The warehouse had an average monthly power usage of 47,588 kilowatt hours and produced about 1,400 pounds of marijuana between October 2011 and May 2013, according to the complaint. The three dispensaries the warehouse supplied did an estimated $4.6 million in sales, the complaint alleges.

Joyce was not charged in the state indictment. The case against Hoskins is ongoing, according to state court records. Krause has pleaded guilty in state court to filing a false tax return and illegally cultivating marijuana, according to the federal forfeiture complaint.

According to records from the Colorado Marijuana Enforcement Division, two medical marijuana dispensaries — Higher Health Medical and Tea Alchemy in Nederland — have applied to grow marijuana at the warehouse on East 39th Avenue. According to the forfeiture complaint, Tea Alchemy has closed.

Despite the indictment and the federal complaint, all the dispensaries connected to the warehouse are listed in state records as "operational pending" — meaning they are allowed to stay open while state regulators decide whether to deny their license applications.

John Ingold: 303-954-1068, jingold@denverpost.com or twitter.com/john_ingold

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